]]>So where are we at? Well on Friday the $IWM closed above daily and WEEKLY upper Bollinger Bands. We posted this on Sunday.

Above upper BB there are often only two choices: digestion or reversal. But rarely is it the place for new entries. Market pulled back and had major follow through today. We like to focus on IWM here because it’s been the clear leader. The first short-term support coming up is the trend-line near 122.

We would like to emphasize “short-term”: as you can see on weekly, it’s not really that important for longer term trend, but if bulls want to keep recent momo alive, that’s what they have to defend.

Along with the trend-line also keep an eye on $QQQ 104.5-105 — that was our first support test (from our first blog post this year!) and we said we would buy the first test. This would now be considered the second test. If that goes (roughly equivalent to $SPY 204) then things can get murky fast.

Another good tell to keep an eye on is the tranny index $IYT. The whole sector is on support right now — watch to see if bulls can keep things alive here next few days. $UNP$FDX$CSX all good for the watch-list. Volatility coming back — watch these major “tell” lines for clues on how serious bears are about this pullback.

]]>http://highchartpatterns.net/now-things-get-interesting/feed/0First time in 2015http://highchartpatterns.net/first-time-in-2015/
http://highchartpatterns.net/first-time-in-2015/#commentsTue, 10 Mar 2015 23:46:24 +0000http://highchartpatterns.net/?p=3204The $SPY finally closed under the standard deviation 2 Bollinger Band for the first time in 2015. Does that make it an automatic buy? Hell […]

]]>The $SPY finally closed under the standard deviation 2 Bollinger Band for the first time in 2015. Does that make it an automatic buy? Hell no. But it does bear watching for other information, as in — is this a trend change?

What would be the first sign of that? No buyers showing up at support always a good initial tell. We’ll let SPY go but we do want to see buyers show up for $QQQ 104.5 area which coincides to 50sma, bottom of BB, and horizontal support. Often what happens is one index takes out support but the stronger one bounces as it hits important levels. This means an overshoot of SPY but a hold of QQQ. Anyway, it’s our working theory and we’ll be buyers of the FIRST test of 104.5-105 area — our style usually is wait for reversal candle with stop 0.5 -1% below.

At one point though there will come a time when this bull market ends and support buying will not work — but timing that will be difficult. Until then we’ll keep doing what has paid — buy oversold move into support with a .5-1% stop.

Right now short term trends have crumbled (the sweet spot between Dev 1 and 2 on BB we kept talking about earlier this month) but longer term trends are very much intact. Eventually all trends do end, and when that occurs the trade becomes shorting rallies into resistance rather than buying dips into support. But let’s cross that bridge when we get to it.

]]>http://highchartpatterns.net/first-time-in-2015/feed/0The plan aheadhttp://highchartpatterns.net/market-thoughts-3/
http://highchartpatterns.net/market-thoughts-3/#commentsSat, 04 Oct 2014 19:33:09 +0000http://highchartpatterns.net/?p=3175 The (at least short-term) top on September 18 wasn’t too hard to predict. That’s not hindsight quarterbacking — on the same day we […]

The (at least short-term) top on September 18 wasn’t too hard to predict. That’s not hindsight quarterbacking — on the same day we tweeted

And if you were watching later that night we even gave out a short future trade we made (and this was the first future trade we had posted going back months — we only do this when we have a very strong feeling about the trade) which marked the very top on Thursday night (but alas which we covered too early on Friday wanting to go flat into the weekend):

Got the top by 1 point, and didn’t get stopped by .5 point. One of our better ones;

So believe us when we say that the top part wasn’t too hard to predict — but the bottom part, well that’s a different story. For a while now we have talked about $QQQ 92 as the level we want to be tested before we can talk about real bottom.

You can see why — it’s the first weekly trend-line and a decent pullback from the highs. It’s not even the big kahuna trend-line from 2009 — more just a friendly, conventional 8% pullback from the highs.

On Thursday/Friday we had a bounce — that again wasn’t too surprising considering $IWM bounced at major monthly levels (horizontal support and held the 20sma). As expected, Russell stalled the bleeding on Thursday and led the bounce on Friday.

Now the hard part and the question we feel a lot less confident on — was that it? We find ourselves questioning our original thesis about QQQ falling to 92. On one hand we look through our own stock universe and really are not impressed. It seems that a lot of stocks managed to run up to resistance in the rally and stall.

$TSLA a great example here — nothing particularly bullish about this chart. Looks like a dead cat bounce to underside of 50sma. Won’t look bullish until it closes above 260.

Lots of charts look like TSLA and make us think that we had a dead cat bounce and are still going lower. But what gives us the greatest pause is the financials. $XLF acts great– nothing wrong with this picture as the ETF stays within the channel. One day this channel will break but we will deal with that when it comes – it hasn’t paid to anticipate major trend break-downs in this tape.

And what better proxy for looking at financial action than $GS — multi-year highs printed on Friday.

Biotech for us is also a canary in coal mine — one of our favorite tells for hot money, and in scared markets, hot money gets cold very fast. So what did biotech do this week? Pullback to first minor support and then rally the hell up back to near highs. Again, for us to feel more bearish we would want money to start leaving this sector — something which is not happening right now. But if it does you can bet we will get more cautious.

So where does that leave us? Looking at individual stocks and indices we think meh. Looking at financial and biotech stocks, not to mention what has happened on every dip since 2013, then we think, well, maybe yes, this indeed was the bottom. Our gut says no, we will see lower prices, but we don’t trade on our gut. We trade on price action. The good thing about last week is that it gave us a major line in sand — the IWM lows at 107 which was horizontal support and monthly 20sma. If that goes, then we think 100 could come pretty fast.

Last week we were pretty cautious for our subs but going into next week we are going to give priority to individual stock set-ups versus feeling strong market bias. If we lose the Thursday lows on IWM we will go back to our QQQ 92 thesis but if bulls can keep the recent gains then we could just as easily be in for new highs.

Go into next week open minded to either direction — if bullish then trade against the Thursday IWM lows. We think IWM is the most important tell of the three right now. If bearish then watch stocks like TSLA — if they can get above those resistance lines and follow through then re-check and re-asses your bias.

]]>http://highchartpatterns.net/market-thoughts-3/feed/0Stock talkhttp://highchartpatterns.net/stock-talk/
http://highchartpatterns.net/stock-talk/#commentsMon, 16 Jun 2014 23:43:41 +0000http://highchartpatterns.net/?p=3167 We used to blog a lot more before Twitter. It seems that at least for us both mediums draw from the same energy source. […]

We used to blog a lot more before Twitter. It seems that at least for us both mediums draw from the same energy source. We tweet, and blogging suffers. But we used to do this “Random Thoughts” posts quite often and are looking to resume the tradition. So without further ado:

— as long as the Russell is outperforming the $SPY we are not worried. We are trying to keep things simple — 115 was our zone last week and the $IWM has defended it like a champ. If that goes, we go to cash.

— we’re long $TSLA (average under 209, have sold day-trade part and swing stop now at 210) and $FSLR ( 66.5 swing with stop on 65 break) and depending on action tomorrow could add $GMCR and $SUNE

— theme here is solar/alt energy. They are right now the best looking sector along with energy and semis.

— If we had one indicator to choose from and nothing else it would be Bollinger Bands (standard deviation 1 and 2/20)

— Einhorn bubble stocks are inflating again but we can’t find any good set-ups there — but glad to have them back in the game.

— pretty interesting how market is completely ignoring the situation in Iraq (except for crude oil spike). Maybe they figure that fight (Sunni/Shiite) has been going on for 1500 years so what’s the diff? Whatevs? But this grizzled QE loving wolf of a market now post-financial crises/Euro contagion and countless other headline crises does not get panicked easily. You know how it goes — doesn’t matter until it does.

— we’ve been trading for over 17 years but it was HCPG 8 year anniversary on Friday. Woot! Things change, but not really. Still trade off daily charts, still look for bases to buy against…

Let us know if you like these type of posts — give us some feedback and if the reaction is positive we’ll go back to doing them. HCPG

]]>http://highchartpatterns.net/stock-talk/feed/0Goodbye sweet trendhttp://highchartpatterns.net/even-though-walk-valley-shadow-death/
http://highchartpatterns.net/even-though-walk-valley-shadow-death/#commentsFri, 28 Mar 2014 20:25:22 +0000http://highchartpatterns.net/?p=3151 What a week. For the first time in a long time (December 2012) the bulls were not able to defend the line: One of […]

What a week. For the first time in a long time (December 2012) the bulls were not able to defend the line:

One of the most pertinent signs of the waning power of bulls is how long relief rallies can last — from a few months, to weeks, to days, and now only intraday. QQQ gave a strong start of a reaction this morning only to be faded and close at the lows UNDER the 20sma weekly. Goodbye sweet trend, it was nice knowing you.

At some point next week we imagine we will go over the line again but the more we test it, the flatter and more irrelevant it becomes. However do note that the 20sma is quite ascending so it’s quite possible that we will go above it and go back and forth a few more times and thus flattening it, before breaking it down definitively.

Today’s fade wasn’t a huge surprise as biotech was weak right from the get go. As we posted at noon with $QQQ still at the highs “IBB is saying — enjoy the relief rally but I am your truth”.

Big break of the 20sma weekly — look how smooth this trend had been from 2012. RIP weekly 20sma 2012-2014.

The question whether the trend for hot money (momentum darling and biotech) has changed is not on the table anymore — it has. The question now is whether we will keep seeing rotation into commodities, especially oils, or whether the tech correction will pull the rest of the market down with it.

$XOM indicative of where the hot money is rotating into — big bad beautiful breakout here at 96.

What’s our plan? We had a partial $QQQ rider that we were stopped out of on the fade and are going home flat. Our mistake was not swinging long $XOM yesterday (a breakout that we had been stalking in our newsletter for days) and instead focusing on getting the bounce on QQQ. As we posted on Thursday we knew the bulls would at least try to bounce it over the weekly 20sma and they did — what was surprising was how short-lived it was.

Going forward we will be shifting our focus to commodities and see what sets up there while still trading the oversold tech stocks (will do that until it stops working). No oil stock is ever as fun as trading a Musk stock ($SCTY$TSLA our favorite stocks to trade) but it is what it is — of course the goal of the job is not fun and games but consistently pulling money from the market. And for us the path of least resistance to do that is to follow the trends, even if it is in some old grandpa stocks.

Market is just getting interesting, stay smart and whatever you do, don’t get stubborn.

]]>http://highchartpatterns.net/even-though-walk-valley-shadow-death/feed/0Update III: Now what?http://highchartpatterns.net/update-iii-now/
http://highchartpatterns.net/update-iii-now/#commentsSun, 09 Feb 2014 16:24:18 +0000http://highchartpatterns.net/?p=3143 Our original post on the correction called for hard edges to trade against at $SPY 177 and 173. We got trades off both but […]

Our original post on the correction called for hard edges to trade against at $SPY 177 and 173. We got trades off both but went to cash on Friday selling all our swings (including a great support long on $CF off 220 support from our newsletter) and a freebie $BRK.B trade under 109 that we had posted real-time on our stream.

Trading against hard edges is where we excel– we have the experience and the conviction and no matter how “gross” it feels we are active in those areas. However, it’s the no-man’s land like the one we are entering this week where things get less clear. Those who didn’t buy off the 173.5 zone bottom are feeling nervous sitting in cash — thinking maybe that was the bottom? And people who sat through the decline and then enjoyed the rally up are thinking “maybe now I am back to break-even I should sell? Is this my chance?”

We don’t think market direction will clear up any-time soon. We have room to possibly 181-182 on $SPY before we hit any major resistance.

Biotechs are acting decent, financials finally found a bid, and the leaders are acting well. However we do think it will be a choppier time going forward as opposed to a trending 2013. And as visibility is reduced, we’re back to shorter holds, and more active trading.

]]>http://highchartpatterns.net/update-iii-now/feed/0Will it be any different this time, part IIhttp://highchartpatterns.net/will-different-time-part-ii/
http://highchartpatterns.net/will-different-time-part-ii/#commentsMon, 03 Feb 2014 19:55:27 +0000http://highchartpatterns.net/?p=3126On Jan 26 we posted the first part of this post, Will it be any different this time? looking at two magnet spots we thought […]

]]>On Jan 26 we posted the first part of this post, Will it be any different this time? looking at two magnet spots we thought market could drift to — $SPY 177 and 173. Well, the 177 prediction was very accurate and tradable.

As you can see the 177 magical place held three times as bots and traders bid it up three times in a short period of time.

However on Friday, after holding it for the third time, we wrote:

So two things: first, repeated taps on support usually lead to cratering of said support — as we saw today. $SPY 177 broke and market has now fallen almost 3 points within hours. Two, the financials were key. They were constantly underperforming the rally. We questioned ourselves on it seeing the hot biotechs bounce, but we were right. The financials were telling the true story. Watch them like hawks going forward.

So what’s next? In the original post we wrote that if 177 goes, the next zone is 173. We still stand behind that:

It’s the lower standard dev 1 on the weekly:

And it’s gap fill on daily.

Now do note that we have no idea if it will serve as a true “bottom”. We have no interest in calling that — all we care about are tradable areas and we think 173 will be one of them, just like 177 was last week. If you’re a short-term trader, get your list ready. If you’re a position trader, well, that’s a different story.

In this day and age we want things instantly — market bottoms unfortunately don’t fit into that paradigm. They could take months to form and the market doesn’t care if traders get impatient, feel frustrated, or become depressed.

Find tradable edges and trade against those — and in between, do very little. At least that’s how we trade, but it’s been sound enough of a system to keep us in the business for over 15 years.

]]>http://highchartpatterns.net/will-different-time-part-ii/feed/0Will it be any different this time?http://highchartpatterns.net/will-different-time/
http://highchartpatterns.net/will-different-time/#commentsSun, 26 Jan 2014 18:31:07 +0000http://highchartpatterns.net/?p=3118 At the start of any correction the question on everyone’s mind is ‘will this be a buyable dip?’ We think ultimately the weekly 20sma […]

At the start of any correction the question on everyone’s mind is ‘will this be a buyable dip?’ We think ultimately the weekly 20sma that we posted on Thursday will tell the tale. Note how it held on every correction in 2013.

That $SPY 177 area will be on many radars — however do note that it’s a weekly chart, so it’s more a zone (and previous corrections didn’t turn on it on a dime either — you need to give it 1-2 bars/ few points). If the weekly 20sma does not hold in the next few weeks then we would say yes, finally the 2013 pattern is broken and we will finally lose the smooth bull trend we enjoyed for all of 2013. This doesn’t mean that we enter a bear market, it just means that the market would become less forgiving and more volatile.

Do note that this is the longest trend we’ve had in between the upper bands since the late 90s. The 2013 20sma weekly pattern ends near 177 but the longer 2 year pattern within the upper bands wouldn’t be violated until 173.

Anyway, we’ve enjoyed a decent intermediate trend, so keep the weekly/monthly charts also in perspective. Of course even if we test support, nothing goes straight down (and a gap up Monday wouldn’t surprise us either) and there are a lot of active trades to be had in between.

]]>http://highchartpatterns.net/will-different-time/feed/0The perfect chart and goalhttp://highchartpatterns.net/perfect-chart/
http://highchartpatterns.net/perfect-chart/#commentsFri, 17 Jan 2014 17:10:24 +0000http://highchartpatterns.net/?p=3105A lot of us on StockTwits fit within different variations of what is called “active trading” even though personally we have slowed down a lot […]

]]>A lot of us on StockTwits fit within different variations of what is called “active trading” even though personally we have slowed down a lot as the years have gone by. Sometimes we think that many years down the road as we get close to retirement ages we will trade even more infrequently (10-12x a year?) and look for those sweet trends to jump on. A text-book case here is $WYNN

Take a look at this chart (click to enlargen):

Entry on trend-line break. Look how it acts — it goes to top of standard deviation 2 on the Bollinger Band (#1 and #3) and then corrects by going to test the upper standard deviation 1 (#2 and #4) and then bounces back up. Just perfect. Also a good case scenario why we don’t like shorting the top of Bollinger Band (while we do like buying oversold stocks testing bottom of Bollinger Bands) — there’s not much meat there. On a strong trending stock price action often goes horizontal until the BB meets up and then resumes trend. Not worth the risk going contra-trend.

The trick of course is finding these stocks before they start their multi-month trends up — you need the right market condition and the right stock, and then you need patience to sit on the winners — something a lot of traders, including ourselves, struggle with on an ongoing basis. As a rule of thumb, the less volatile the market, the longer we try to hold the swings. The more choppier the trend the more we go into “daytrade mode”.

If you started trading in the last couple years do note that this is not the “norm” — this is an exceptionally benign and bullish market. We’re naturally cautious traders — probably because we were marked in our early years by the horrendous tech crash of 2000-2002. We haven’t “maximized” gains during the bull run because we are not the pedal to the metal types and when we get overbought, we get defensive and raise cash. We have no regrets on this — one of the things you learn in your career is to find a balance between quality of life (stress of positions– we don’t want to lose sleep or obsess about our positions once we leave the office) and PnL. Our goal for many years now (for all of us this stage came after we started after having kids) has been not to make the maximum amount of money but to balance out a good life with a good income. Easier said than done but always the goal.

]]>http://highchartpatterns.net/perfect-chart/feed/0Government shutdown/Debt crisis in perspective — see yellow boxhttp://highchartpatterns.net/government-shutdowndebt-crisis-perspective-see-yellow-box/
http://highchartpatterns.net/government-shutdowndebt-crisis-perspective-see-yellow-box/#commentsSat, 19 Oct 2013 23:15:15 +0000http://highchartpatterns.net/?p=3086 Weekly chart of the $SPY — the government shutdown/debt crisis October 01-17 is highlighted in yellow. Could it have been more inconsequential in […]

Weekly chart of the $SPY — the government shutdown/debt crisis October 01-17 is highlighted in yellow. Could it have been more inconsequential in terms of longer-term price action? No. Did it feel huge at the time it was occuring with social/old media talking non-stop about the potential self-destruction of the country? Yes.

As our buddy Josh sagely writes – “When push comes to shove, the one thing that you can absolutely count on in this world is that rich white people will end up preserving the status quo.”

Market at very interesting place here at top of weekly trend-line channel:

Two things usually happen when price hits top of trend-line: 1) we go back down and have reversion to mean (healthy as market digests gains and then often keeps trending higher) or 2) market explodes higher and breaks channel. We would prefer a lowering back into channel as often gains are more sustainable over longer term. However, as we very well know, what we prefer, and what actually occurs, are quite often different things.

Anyway, with top of channel price action and SPY over the top of Bollinger Bands it should be an interesting coming week. Stay tuned. HCPG